I Got Rich in My 20s. Here’s How You Can, Too

how to get rich in your 20s

Trying to figure out how to get rich in your 20s might seem like a waste of time. After all, don’t most people who become wealthy do so when they’re middle-aged? Is it even possible when you were in high school just years ago? Unless you’re about to create the next Facebook or SnapChat, we generally assume that our life plan will look like this:

  1. Get work experience in your 20s and 30s.
  2. Try to save money and repay debts.
  3. Be successful in your 40s.
  4. Retire in your 60s.

To most, getting rich in their 20s is beyond unrealistic. It’s outlandish. But in this article, I’ll explain how I did it – and how you can, too.

About this article

I first wrote this article in January of 2015. I was 26 years-old at the time and had just achieved financial freedom. The passive income I earned from my portfolio of investments and businesses exceeded my expenses. As such, I could quit my job and be free of managers and bosses. As they say, I could “live life on my own terms.”

Despite reaching that milestone, I stayed employed for another year. I found my work stimulating and I didn’t know what I wanted to do if I was to leave. I obviously wasn’t going to retire at 26. But in May of 2016 I resigned, opting to become a full-time writer and investor.

I’ve updated this post a few times since it was first published, most recently in March 2017. Once in a while I’ll reflect on my experiences and share things that I missed when I initially wrote it. My opinions and perspective have evolved as I’ve matured.

What is wealth?

When I was just starting out, I believed that being wealthy was to have a lot of money in a bank account. I remember my goal was once to save $1 million. If I could do that, I thought that I’d be rich. But at 23 years-old I learned a concept that would change my life forever. Being rich is not about how much cash you have. Rather, it’s how much passive income you earn from your assets.

For example, if you looked in my bank account today, you wouldn’t see a lot of cash laying around. I have enough to pay my bills and to buy food for my dog, Luna. But not a lot more. However, I own assets – like companies and investments – that create revenue for me every month. I can drain my bank account knowing that in a couple of weeks my portfolio will replenish it. I’ll spend what I need and reinvest what I don’t. When I make new investments, I acquire more income producing assets.

Therefore, the name of the game is asset accumulation, specifically those that create passive income. It’s got nothing to do with university degrees and salary raises. We want to acquire, both by building and buying them, things that make us money. Knowing that is at least half the battle (no exaggeration).

Some examples of assets include:

Your assets must pay for your lifestyle

If your assets can pay for the lifestyle you want, then you are wealthy. For instance, if you need $10,000 per month to be happy – and your portfolio creates that for you passively – then you are rich. We don’t care about net worth. We focus on cash flow.

A good test for whether you’re financially free is to ask yourself this: “Can I stop working and still live the life I want, without losing wealth?” The only way to do that is to have your assets produce enough revenue to accommodate your lifestyle. If you saved $1 million, you’d probably run out of money in a couple of decades.

In case you’re wondering, I don’t live a minimalist lifestyle or pinch pennies. It would be a lot easier to say that you got rich in your 20s if your monthly expenses were only a couple of hundred dollars. After all, it’s not hard to create that much in passive income. But without delving into my private life too much, I will say that that isn’t the case. I obviously don’t spend recklessly. However, I live in a good part of a pricey town, I can travel frequently and dine where I want to. I have guilty pleasures and most of them cost money.

It’s funny, actually, because I care much less about money today than I used to. A couple of years ago I bought a $21,000 watch from Omega because I wanted to show off and look rich. Now I wear $50 shoes and plain t-shirts from Nike. I’m more interested in investing than I am in spending.

But I digress. My point is that while controlling expenses can help, you’ll see from this article that the focus should be on increasing your revenue. You can’t reduce your way to wealth. If you want to get rich in your 20s, or at any age, you’ve got to have a high passive income.

How I got rich in my 20s: getting started

Like most young people, I got a job in my early 20s and earned an average income from it. I made roughly what any 23 year-old could expect to make with an undergraduate degree in political science. This was around 2011. The economy was slowly recovering from the worst recession in 70 years. There were jobs, but they weren’t easy to find and usually didn’t pay that well. I worked in sales.

My goal from then on was to become financially free. One reason was that I thought it would make me feel happy and accomplished. However, I also never wanted to depend on a boss for pay. The fear of losing my job motivated me to become self-sufficient. The way to do that was to get rich as soon as I could.

By this time, I already knew that wealth was built by acquiring assets. I learned that from the book, Rich Dad Poor Dad. If you haven’t read it yet, you should. I don’t agree with everything in it, but some of the concepts are groundbreaking.

Thus, I squirreled away a couple of hundred dollars with each paycheck I received. But rather than saving money and accumulating cash, I invested almost everything I earned. Specifically, I bought assets that paid a monthly income. That’s in contrast with ones that realize profits through a price increase (buy low/sell high).

Like any other beginner, my first investments were not great. I was neither experienced nor informed enough to know where to look or what to buy. I just knew that I needed passive income investments. I went to my bank’s website, viewed their mutual funds and selected ones that focused on cash flow.

My first few purchases were:

  • RBC Bluebay Global Monthly Income Bond Fund
  • RBC Canadian Short Term Income Fund
  • RBC Bond Fund

These investments produced an annualized cash flow of around 3%. For instance, if you invested $1,000 in one, you’d earn an income of about $2.50 per month. They also had the potential to increase in value. The funds were designed for investors with shorter time horizons, like retirees, or people with a low tolerance for risk. As you might imagine, I didn’t make a lot of money with them.

Regardless, each month I would put a portion of my paycheck into one of those funds. The next month the investment would dump a few dollars back into my bank account. But rather than spend it, I would reinvest that extra income along with whatever I could scrape from my paycheck. It was a simple process that I repeated for several months. Here’s an example of what it might have looked like:

January: invest $500

February: invest $500 + the $2 I earned from last month’s investment

March: invest $500 + $2.10 that I earned from last month’s investment

April: invest $500 + the $2.20 that I earned from last month’s investment

The spitfire approach

The practice of buying revenue producing assets and reinvesting in them was the foundation for how I got rich in my 20s. It wasn’t lucrative yet, but it was an important stage in my journey. I also read voraciously and subscribed to various business and finance publications. I followed the markets closely, always searching for buying opportunities.

Note: it’s easier to be engaged in this kind of literature once you’ve made an investment. Without skin in the game, the material can be quite dry.

As I gained experience, I eventually graduated from mutual funds to stocks. I discovered property-based securities like Real Estate Investment Trusts (REITs) and Mortgage Investment Corporations (MICs), which were both available on the stock market. These assets paid substantially more than 3% per year. I found ones that yielded 8,9 and 10% and placed my capital in those. I ditched mutual funds and bought shares in REITs and MICs whenever my job or portfolio paid me.

As math would have it, buying higher-yielding assets caused my investment income to escalate from a few dollars a month to a few-dozen dollars. I was no longer crawling at a snail’s pace. The more I could invest, the more money I made. And the more money I made, the more I could invest. My portfolio was slowly beginning to snowball, earning a little bit more each month.

Compounding growth

Knowing that I lacked the capital to generate large cash returns, my investment strategy was to capitalize on compounding growth. Rather than waiting for my assets to rise over the long term and potentially reinvesting only once or twice a year, I chose to take small, quick income injections and reinvest them monthly. Thus, I could compound my growth multiple times annually.

Rudimentary math will explain why I chose this strategy: the power of compounding growth is astonishing. Albert Einstein once called it the eighth wonder of the world. For example, imagine that you invested $10 million for a period of ten years, and received a return of 10% per year. If you were to reinvest your returns only once a year, your capital would be worth $25,937,424.60 after a decade. However, compounding it monthly would equate to $27,070,414.91 – nearly a $2 million difference. To me, it was a no-brainer: invest and reinvest as frequently as possible.

Soon my portfolio began pumping out a couple of hundred dollars monthly. Since different assets paid on different days, I received income distributions several times a month instead of just once or twice. I could then go from investing every 30 days to bi-weekly. As a result, the power of compounding interest increased, allowing me to invest even more frequently. Eventually I could make small investments on a weekly basis.

This was an early step towards getting rich in my 20s. I’ll switch gears briefly to discuss my job and revisit investing shortly.

Being in the right environment

My work in sales was both my first and last “real” job. But it was crucial to becoming rich in my 20s. The company was a small to mid-sized firm and had a dozen offices across the country. Though less than a year later, it imploded after a flood of legal and administrative challenges. Most of its staff were laid off as a result, but I convinced the owner to keep me on. The business then experienced years of convulsions of shrinking and growing, constantly trying to stay afloat and redefine itself.

This tumultuous environment was a blessing to me. I quickly learned that opportunities in business come to those willing to step up, take risks and take responsibility. Most of my colleagues stagnated and were paralyzed by fear. The rest were happy to follow behind any sort of leader. All they wanted was stability and a regular paycheck. I had the luxury of being young and having nothing to lose.

Over the next five years I climbed the ranks from sales, to lower management, to senior management and eventually to CEO. I gained the benefit of rebuilding a company without taking all of the risks that a business owner would. Further, my boss encouraged entrepreneurship and wanted me to have my own companies and investments. Unlike so many other young adults, I wasn’t relegated to crunching numbers in a cubicle. I was learning, negotiating, creating, selling, travelling and networking. And, of course, I was investing as much of what I earned as possible.

Note: even as CEO, my salary was nothing outstanding. The firm couldn’t afford to pay much.

Indeed, the job took its toll on my health. I worked long hours and didn’t consistently exercise or eat well. I had few friends. I also faced residual consequences of the firm’s past legal challenges. I was always stressed and deeply anxious. I had difficulty enjoying time with my loved ones because I was preoccupied by work.

Advantages

The drawbacks notwithstanding, my job yielded important advantages. I was able to work directly with my boss’ business partners, including people like Robert Kiyosaki (author of Rich Dad Poor Dad), Ken McElroy (owner of over 10,000 apartment units) and various wealthy oilmen, restauranteurs, venture capital, technologists and healthcare entrepreneurs.

While most take financial advice from bankers, I gained my education from self-made millionaires. There is nobody more qualified to teach you to get rich than other rich people. I saw how they thought, how hard they worked, what they focused their attention on, who they spent time with and what they invested in. When I became a senior manager, I took part in joint ventures with them. I even helped build a business that spanned across the USA, Canada, Mexico, Poland, Sweden, Holland and Germany. I spoke on stage at the 2014 National Achiever’s Congress in Amsterdam to a crowd of 5,000. I met with high-powered lawyers and intelligent accountants that I couldn’t have known on my own. The experiences I had were invaluable.

If I had to choose the most important lesson I learned from them, it would be that the way to build wealth is to own businesses and make income investments. I’ve never heard a financial planner say that. I wonder if I’d know that today if I didn’t have that job.

As a side note, I later realized that being rich does not equate to intelligence or morality. Some of the people I worked with were narcissistic, debauched and tragic human beings. Others I admired for reasons beyond their monetary accomplishments.

Making sophisticated investments

From those mentors, I also came to understand that investing is a profession. If you want to get good at it, you can’t just casually follow the markets, read the news occasionally and delegate your capital to a financial advisor. Instead, it requires a lifelong commitment to study, research and practice.

I learned that investing is no different than a doctor who does a 4-year undergraduate degree, a 4-year medical degree and a 6-year residency before she can even obtain a license. Like some of my friends who pursued law and accounting, and my then-girlfriend (now wife) pursuing medicine, I began to view myself as a professional. Sure, I had a job. But what was my profession? It was investing.

That small altering of mindset caused me to change the way I researched my investments. I went beyond considering price/earnings ratios and viewing a REIT’s dividend history on Google Finance. I delved into how assets were structured (corporations, trusts, partnerships, etc.) and why that was the case (domestic and international taxation, liability reduction, etc.). I studied corporate, real estate and securities law and hired attorneys to help me. I taught myself to read 150-page contracts, prospectuses and offering memoranda. I learned to construct investments from the ground-up. Just like an accountant could recite tax code, I could decipher and calculate the legal and financial intricacies of any entity I invested in.

The result was that my investments were more effective. I started to earn returns well into the double-digits. I understood that risk and ROI don’t have to be correlated. Rather, you can hedge your bets with tools and by simply knowing more about a deal. Sure, if I blindly selected ten penny stocks, I would probably lose all of my money because they are risky and I don’t know much about them. But there are many professional penny stock traders who make a great living. The difference between me and them is not luck; it’s that they know what they’re doing. The reason most “mom and pop” investors never get ahead is because they don’t, either.

High-impact investments

Becoming a sophisticated investor dovetailed with another advantage I gained from work: getting introduced to private equity, venture capital and private debt opportunities. Through my boss’ connections, I gained access to various investments in privately-held real estate, advertising, food services and even technology deals.

I was drawn to those assets because of their flexibility. Thanks to my mentors, I learned that I could reduce my risk by negotiating the terms of my investment – something that cannot be done with stocks, ETFs or mutual funds. I could deal directly with the CEO instead of a low-level banker.

For instance, I would often request monthly income payments, even if other investors weren’t privy to them. I used instruments like Personal Guarantees, General Security Agreements and liens to protect my capital. I even structured the deals so that my lawyers would help with the due diligence, while the entrepreneur would pay for my legal bills (another trick of the trade).  Just like trading penny stocks, these investments are not risky if you pick the right ones and know how to structure them correctly. The only downside for me was that they were illiquid.

The returns I earned from these deals were astronomical when compared to REITs, MICs and other income stocks. It was a game-changer for me and caused my passive income to escalate quickly. Just like I once did with mutual funds, I abandoned income stocks for private equity investments.

In my debut book, Rich At 26 (you can download the e-version here for free), I was adamant that private equity is the superior asset class. At the time, I believed anything else was sub-par. But looking back, I now realize that the reason they were so powerful was because I spent so much time learning how to make them. I could probably have done just as well with REITs, MICs or any other vehicle if I made as much of an effort. As such, there might be a different asset that works better for you. The point is to become a professional at whatever one you choose. Get really, really good at it and your portfolio will grow.

Increasing my buying power

While my passive income was expanding rapidly, there was a seemingly endless supply of investment opportunities that I couldn’t afford to participate in. I simply didn’t have enough cash. To solve that problem, I borrowed money to finance them. Though it magnified risk significantly, I was confident enough to give it a shot. Interest rates were at all-time lows and capital was plentiful, so I knew it could be an effective tool. Many of my mentors used banks loans to finance their deals, too.

I started with small amounts, but gradually increased it as I grew comfortable with managing investment debt. Over the years, I borrowed hundreds of thousands of dollars. Each time I took a loan, I invested the capital and made a profit by keeping the difference between the rate of return and what I owed the lender. For example, say I borrowed $100,000 at an interest rate of 4%. I would then invest it and earn 18%. Once I got the money back, I would repay the lender the $100,000, plus the $4,000 in interest – and keep the $14,000 profit. I always reinvested the profit into new deals.

Looking back, the amount I borrowed was probably overboard and irresponsible. It could have backfired and wiped me out. However, it ended up becoming invaluable to getting rich in my 20s. I had the capital to enter great deals and bolstered my passive income significantly. But be cautious if you go down this path, too.

Read more: How to Acquire Assets When You Have No Money

Owning small businesses

While making investments and gaining crucial work experience, I also had two small side-businesses over the course of five years. One was online and later transformed into this website.

The benefits of having a company were plentiful. First, I learned about business from the perspective of an owner, rather than an employee. There’s a real difference when you make decisions that can impact your own money. You, alone, are responsible for its fate. That knowledge became particularly useful when I left my job in 2016.

Second, I gained various tax advantages, which offset my income and let me keep more of what I learned. My tax bracket probably fell by 20% as a result.

Third, my companies supplemented my employment and investment revenue, allowing me to buy more assets. This, in conjunction with acquiring high-impact income investments, reinvesting frequently and using leverage, is ultimately what caused me to reach financial freedom in my 20s.

Read more: Why You Don’t Need Capital to Create Wealth

How you can get rich in your 20s

I’ve shared my story with you, but now what? How do you get rich in your 20s? In my view, you can do so by following either of two avenues.

First, start a business that you can scale and eventually exit from. You might choose an e-commerce website, network marketing, drop-shipping or something more traditional. Whatever it is, be sure that you can make money and walk away from it. You don’t want to be trapped in a company that will require constant management forever. You should also be networking and rubbing shoulders with people who are experienced and more successful than you.

Reinvest your business’ profits into income producing assets that pay monthly. You should spend as much time on becoming a sophisticated investor as you do on your company. Your goal is to maximize your returns while reducing risk to the greatest extent possible. If you are successful, your passive income will exceed your expenses and you’ll become financially free.

Second, work in an environment that’s conducive to your goals. Don’t just get a job for the sake of earning a salary or bolstering your resume. For instance, if you’re interested in property investing, then find a real estate development firm to work for. Get a mentor who is wealthy. Glean the tricks of the trade and meet people from whom you can learn. I wouldn’t necessarily suggest searching for companies on the brink of collapse, but go somewhere small enough to build relationships with the bosses.

While working, focus on making investments into assets that produce monthly revenue. Have a small business on the side, too. Again, investing should be your profession.

You can go down either route or do what I did and choose both. Nothing stops you from being a combination of an employee in the right environment, a business owner and a sophisticated investor.

Conclusion

Building wealth is not an exact science. There are variables, including luck, circumstance and availability of opportunity. There is also risk. But if you follow these steps, I believe you will have the greatest chance at getting rich in your 20s, or at any age.

  • Buy income producing assets (invest)
  • Reinvest as frequently as possible
  • Create assets (start a business)
  • Network and learn from successful others
  • Get a mentor
  • Walk through every door that opens
  • Become a professional investor and entrepreneur
  • Be persistent and ignore naysayers
  • Ignore distractions
  • Do not jump from one business to the next

As mentioned earlier, in 2015 I wrote a book, called Rich At 26. It was released shortly after I became financially free, so many of my views have since changed. However, it was a raw perspective on what I did to build wealth. It sells in paperback, but you can download the digital version for free. This was a long article to read – you deserve it!

Lastly, I’m often emailed with follow-up questions after people first read this article. I’ll address some common ones here.

#1: What REITs and MICs do you buy?

Obviously, it depends on the market and what I’m looking for. In general, however, I’ve considered the following ones:

  • Dream REIT
  • Morguard North American Residential REIT
  • Gladstone Commerical Corporation
  • Simon Property Group
  • Trez Capital Corporation
  • Timbercreek MIC

#2: Do you like P2P lending as an investment? 

It’s a developing business, but in short, yes. I like Lending Club and Prosper for Americans and Lending Loop for Canadians. I have an in-depth article about it here.

#3: Can I participate in real estate in other ways besides REITs and MICs?

Aside from directly purchasing a property, you can joint venture and partner with other investors. I’m also supportive of real estate crowdfunding websites, which give investors access to property deals from the comfort of their laptops. Personally, I think platforms like these are the future of real estate investing.

#4: Can you be my mentor?

I started an online mentorship program in June 2016. Due to scheduling issues, I can only accept limited students. You can apply to join here.

About The Author

Alexis Assadi

Alexis Assadi is an investor, entrepreneur and writer, who advocates for making high-performing income investments and the lifelong pursuit of financial intelligence. He is a shareholder and director in three companies that provide funding to small businesses, entrepreneurs and real estate projects. His most recent venture is a firm called Pacific Income LP.

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